For the quarter ended December 31, 2012, Microsoft reported a 2.7 percent boost in revenue to $21.5 billion from $20.9 billion in the year-ago quarter. However, the Windows maker saw a 3.7 percent drop in profit to $6.38 billion (76 cents a share) from $6.62 billion (78 cents a share) one year ago.

Microsoft saw a revenue increase of 24 percent in its Windows division to $5.88 billion (or 11 percent when adjusted for early sales of Windows 8) for the second quarter, which was the first to include Windows 8.

Microsoft didn't offer sales figures for its first homemade tablet, Surface with Windows RT. The new version -- Surface with Windows 8 Pro -- is expected to hit store shelves on February 9.

“Our big, bold ambition to reimagine Windows as well as launch Surface and Windows Phone 8 has sparked growing enthusiasm with our customers and unprecedented opportunity and creativity with our partners and developers,” said Steve Ballmer, CEO at Microsoft. “With new Windows devices, including Surface Pro, and the new Office on the horizon, we’ll continue to drive excitement for the Windows ecosystem and deliver our software through devices and services people love and businesses need.”

Windows 8, which was released in late October 2012, was met with plenty of criticism for its massive redesign. However, many PC makers (such as Dell) were hoping that it'd be the saving grace for the PC market, where hardware sales had been declining over the years as mobile devices (smartphones and tablets) exploded onto the scene.

But many PC makers didn't see a huge increase in sales with Windows 8. And while Microsoft hasn't released sales figures for its Surface tablet yet, reports last month indicated that the new device took a sales hit due to a lack of distribution. Microsoft had only offered the Surface with Windows RT online and at Microsoft stores (and there are a little over 60 stores total in the U.S.).

In mid-December, Microsoft finally allowed third-party retailers to sell the Surface. Surface with Windows RT also made its way to Australia in mid-December, and will do so in other countries in the following months.

In today's financial earnings report for Q2, Microsoft also announced declines in its Entertainment and Devices division (including Xbox) of 11 percent to $3.77 billion and its Business division (including Microsoft Office) of 10 percent to $5.69 billion from a year earlier.

Microsoft's shares were down 2.1 percent in after-hours trading today to $27.63.

You know, I agree with you to a certain point. Tablets are an important and raising force in the computer/technology industry. Personally I run windows 8 on everything from my tablet to my htpc to my twin xeon 32GB desktop.

However, your comparison of a crappy tablet game (and yes, they're all crappy) to Skyrim is a mortal sin! You'll have to pry my skyrim from my cold dead hands! That said, even though skyrim is 5000% better on the PC, it can be had on the PS3 and/or XBox to those who don't care about free community mods and such. Skyrim is but one of many though. Battlefield 3, Call of duty, Crysis, etc all cream any "tablet/phone" game out there. I understand that I'm the exception, not the rule and that most people with a desktop probably use it for mp3s, facebook, school work, and minesweeper and could likely make due with a tablet easy. I have a tablet too, and it rules. It's a supplement to my desktop though, not a replacement. When I need the power, I have it. Personally I need the power often as I do things with my PC's most people wouldn't touch.

Yeah, I know that you and other high end PC gamers with $1000+ 133t rigs look down on tablet gaming but you have to understand that you guys are a minor niche these days. Big money is in tablets and tablet gaming and it will grow quite a lot unlike the PC gaming which won't grow as fast or won't grow at all. Problem is you don't understand that Apple invests a huge amount of R&D into the fastest (and at the same time cheap and efficient) tablet SoCs possible, their newest A6X chip is quite good at 3D and way, way better than tablet SoCs from just two years ago. With such amount of progress don't be surprised seeing tablet gaming going up significantly in profits and quantity/quality of content while PC side staying the same.

It's just that Apple and MS are looking at the future and you are looking at the past. It's that simple :)

It's not so much that I look down on tablet gaming, it's that most tablet games genuinely suck. Very few are worth my time of day. Ninety percent of them are word games, cut the rope, angry birds in some other scenario everyone wows over... these games are neat/fun for about five minutes and then quickly uninstalled. They are certainly NOT a replacement for my computer/console games. When I pick up my phone it's pretty much never to play games. Actually the only reason I have any games on it at all is so I have something to do while I'm sitting on the can at work. Yes tablet games will get better, this is obvious and I have absolutely no doubt that they will some day be what PC gaming is today. Thing is, your assertion that PCs are just going to stand still is dead wrong. Progress will be made. Hell, have a look at the newest cryengine stuff and tell me anything on your tablet comes close to it. Yes, SOC'S are great, but their focus is mainly on power efficiency and not on maximum performance. That's what makes them ideal for tablets and cellphones. PC's on the other hand could care less about power consumption for the most part, and therefor they can focus purely on performance. In fact it's only been in recent years that laptops became as "good" as desktops performance wise and that's still a stretch. You can by a laptop with an i7 and 16GB RAM sure, but it'll last you about 3 hours tops, cost a ton of money and is only about half to three quarters as powerful as a desktop at equal price (certainly can't touch my main system). There is no arm processor that can come close to touching anything even one of xeons can do, and there wont be for quite a few years because that's not their focus. By the time there is, my new xeons will be far superior. So really it's a question of how much processing power do we really need. As applications get smarter and AI becomes more standard and we demand complex tasks be faster and faster, well as always, the sky's the limit. There will always be (at least for the foreseeable future) a place for desktop and traditional laptops. They might not be as big a market as the tablets are but they aren't fading away into obscurity as some people would have you believe. Even Apple realizes it and that's why they still sell them.